Calls for review of pensions buyouts model

A full review of pensions buyouts models - where a finance company takes over a pension scheme from a sponsoring employer - is needed to anticipate any future threats to members' interests, says the TUC.

In its submission to the DWP consultation - The Powers of the Pensions Regulator - the TUC welcomes the additional powers proposed for the Pensions Regulator, which it says will help protect pension schemes from poorly funded buyouts or unscrupulous investors that put pensions at risk.

The TUC believes that the principles-based approach to regulation, as proposed in the consultation, is the most effective way to give the Pensions Regulator the flexibility it needs to adapt to the constantly developing buyouts market. But in order to keep up with any new business models, the TUC is calling for a full review of buyouts to ensure that the regulatory regime is fully up-to-date.

The TUC submission also says that member nominated trustees (MNTs) play a crucial role in ensuring that schemes are run in the interests of members and urges the Government to require schemes to have 50 per cent MNTs. The TUC believes this will help to prevent trustees from being bypassed in any buyout decisions.

TUC General Secretary Brendan Barber said: 'The buyouts market has grown at breakneck speed in the last 12 months.

'While insurance-based buyouts can provide greater security to members' schemes, the growth of increasingly complex and potentially risky new buy-out models could pose a serious threat to pension schemes. Without better regulation, it would only be a matter of time before we faced a scheme disaster.

'The additional powers granted to the Pensions Regulator are welcome. But new business models will emerge and a full review is needed so that pensions schemes are not put at risk by new asset-stripping business models that rely on avoiding regulation.'